“If you ask 100 people to name their major sources of stress, most likely they will include “finances” or “money”.  And it is no wonder.  Prices are rising, jobs are uncertain and college and retirement costs are increasing every year.”  This according to the experts at the Excedrin Headache Resource Center, sponsored by the Bristol – Myers, Squibb Company.  The American Institute of Stress, Yonkers, NY, states, “Job stress is estimated to cost US Industry $300 billion annually, as assessed by absenteeism, diminished productivity, employee turnover, direct medical, legal and insurance fees, etc.” The most recent terrorist events and the impact on jobs, personal net worth and consumer confidence have magnified the problem.

E. Thomas Garman is a Fellow and Professor at Virginia Tech, home of the National Institute for Personal Finance Employee Education (NIPFEE), an organization dedicated to improving employees’ financial wellness. Researchers from Virginia Tech decided to find out if there is a relationship between personal finance and individual health? Well-educated, high-income, white-collar workers were recruited for the study. Participants were offered a financial education program at the work site and a private, one-on-one financial advice session. Workers were surveyed before and after their participation. The study shows that financial education and advice positively impacts individual money behaviors and attitudes, as well as, their health and work performance. In addition, compared to employees who have higher financial wellness, workers who were less satisfied with their personal finances were found to have poorer health.

Doctor Garman points out in his paper, ‘The Whole Story of NIPFEE in Eight Paragraphs,’ that, “Approximately 15 percent of workers in the United States are currently experiencing stress from poor financial behaviors to the extent that it negatively impacts their productivity.  At some work sites the proportion is as high as 40 to 50 percent.  It is estimated that perhaps one-half of workers with personal financial problems also are likely to be performing poorly on the job, and this negatively impacts their employers.  The cost to the Department of Defense is about $1 billion annually.”

The Sallie Mae Education Institute provided the following results of a survey of parents with college bound children. “The importance placed on their child’s education was corroborated when almost one-third of the parents (31%) said their child’s college education was their highest priority.  This was second only to the 38% of parents who indicated their everyday budget was their first financial priority and almost twice the percentage of parents who named retirement (17%) as their first priority.  In addition, a college education was among the top three financial priorities for nine in ten respondents.”

According to the General Accounting Office (GAO) as reported in Parents News,   “a recent report found that during the past 15 years, tuition increases have outpaced household income gains by a 3 to 1 margin.  The report went on to say, “the average tuition for undergraduate students at public four-year colleges has increased 234 percent since 1980, while the average household income rose only 82%.” 

A direct result of increased costs–increased debt.  “Student loans have risen from 41% of all student aid in 1980-81 to 58% during 1998-99, while grants have fallen off from 55% to 40% of all financial aid for the same time period.”  The College Board, Trends in Student Aid. 

Obviously, an alternative is for parents to reach into their IRA’s or pension plans.  Like trying to put a fire out with gasoline, stripping retirement savings to pay for college only deepens financial concerns and stress. 

Doctor Garman states in ‘The Whole Story of NIPFEE in Eight Paragraphs,’  “Smart employers realize that good financial wellness and key measures of productivity are positively related.  Such employers know that spending money to give workers comprehensive personal finance education will provide a positive return on investment for every single dollar invested.”   Employee financial education is effective in reducing stress. 

Providing unique and effective employee financial education to enhance the corporate benefits plan also impacts the critical issue of retaining valued employees.

The American Management Association reported in HR Focus that “The US Department of Labor estimates that it costs a company one-third of it’s new hire’s annual salary to replace an employee.”  According to Positive Directions, Inc., a Florida-based management consulting firm, “Employee turnover can have a devastating effect on pretax income.  Some experts feel it is a major contributor to lagging US productivity and the failure of US industries to compete effectively.  In the US there is a 30% turnover in all front line jobs.”

Business Psychology News, reports on a study that supports enhanced benefit programs to increase employee retention. “Another study on worker retention by Sibson and Company of New Jersey found that focused incentive programs aimed at core workers kept good people and improved productivity.”  The results of a 1999 employee retention survey conducted by Thomas Staffing, which provides staffing solutions to employers in Southern California, concluded, “To retain new hires, almost 30% of respondents say they offer additional employee benefits at the start of employment.”   

The ability to handle college costs is basic to financial wellness, the importance of which is only going to increase over the next decade. According to the College Board, “The number of high school graduates will increase by 13% between 1999 and 2009.

College enrollment figures for 18-24 year olds will grow from 8,200,000 this year to 9,600,000 by the year 2009.”   College planning will become critical not only from a numbers perspective but also from an income perspective.  “The gap between disposable Per Capita Income and college costs is narrowing.”  The College Board, Trends in College Pricing.

Here is the critical issue, effective college planning involves much more than simply deciding how much and where to invest.  Financial aid planning encompasses a myriad of options and considerations outside of private scholarship searches.  Many investment decisions made by well-intentioned parents, in the absence of any knowledge of the student financial aid system, ultimately could end up costing them more than they ever achieved in savings over the years.   Every financial decision a family makes will effect investment return, tax liability and financial aid eligibility in some way.      

In today’s aggressive college environment, colleges and universities are competing to meet their bottom line or attain brighter, larger or more diverse student population.  This has caused the financial aid and the admissions processes to become more and more entwined in order to facilitate this shift toward “enrollment management.”  Increasing amounts of financial assistance are finding their way to middle and upper-income families.  Yet at the same time, the rationale for this “strategic packaging” becomes more and more evasive. 

Parents need not only understand how financial aid works and how it impacts other financial considerations, they also have to be able to wind their way through a maze of information.  The major challenge in college planning today is not finding information. We’re drowning in it.  If you go on the Internet and searched for college planning or scholarships, page after page of matches come up.  It would take weeks to screen all the matching entries. The challenge is not the availability of information, but rather what to do with it once you’ve got it.  How do parents manage that information, bring a focus to it and make it meaningful to their student? How do they use it to make good educational and financial decisions? 

They must also be involved–involved in the information management process, involved in every aspect of the process.  They cannot afford to let the system take its own course.  There are too many variables and too little information flowing between families and colleges.  You have to be involved to insure that everything goes according to design; that the right things are being done at the right time, in the right way.

This involved process encompasses exploration and discovery, shopping and analysis, facilitation and negotiation.   Through exploring the student’s skills and personality in conjunction with potential job and career opportunities, the student will discover the proper educational direction to support that career.  Required education along with the student’s scholastic profile, personal and family preferences, provides parameters by which they can screen the pool of colleges and universities.   Coupled with available information on those institutions’ historical financial aid performance and internally controlled scholarships and grants, allow the student and family to analysis them for “best value.”  Once the field is narrowed to those colleges and universities they wish to apply to, applications and supporting documents must be facilitated for maximum effect and financial aid award letters analyzed and if appropriate, discussed with the school. 

Corporate benefit plans must address these issues and provide parents assistance with college planning to precluded being blind-sided by decreasing productivity and loss of  key personnel.

There are a growing number of financial professionals who are specializing in college and financial aid planning.  Their services go far beyond the “college planning” module of most financial firms’ offering of pension management and education.  These modules simply provide for the traditional college cost calculations, normally resulting in a depressingly high, required investment figure.  ‘True’ college and financial aid planning services address the process of attaining admission to college, the financial assistance to help pay for it and establishing options to handle the family’s costs after aid is awarded.  

College planning professionals can provide seminars, workshops and hands-on consultation for your employees. 

CEOs and their Human Resource Directors may confidently pat themselves on the back for having met ERISA 404C fiduciary responsibilities, but ponder whether the limited financial education provided employees is effectively addressing the critical issues causing stress-related productivity loss.  Adhering to ERISA guidelines may be a legal catch-22 with potential employee litigation for non-compliance or over-compliance, but being pro-active in reducing employee stress and improving productivity is a win/win situation, impacting directly the corporate bottom line.